The Financial Conduct Authority (FCA) has fined Chase de Vere Independent Financial Advisers Limited (Chase de Vere) £560,000 for failures surrounding the sale of Keydata products.
Between August 2005 and June 2009 Chase de Vere’s advisers sold Keydata life settlement products to 2,806 customers who invested a total of £49.3 million. The Financial Services Compensation Scheme has paid compensation to eligible customers up to the scheme limit, which was £48,000 per customer at the time. 139 customers invested a total of £4.4 million over the scheme limit and the majority of these customers may not recover the full losses arising from their investment.
Chase de Vere did not research the Keydata products well enough to understand the risks they posed to customers and did not ensure that its advisers understood those risks. As a result, the advisers did not explain the risks of investing in Keydata products properly to customers, and the firm made this worse by ceasing to provide standardised wording to advisers to help them describe the risks to customers.
As a consequence of this, Chase de Vere failed to disclose to its customers certain distinctive features and risks of the Keydata products in a way which was clear, fair and not misleading.
Tracey McDermott, FCA director of enforcement and financial crime said:
'Firms need to ensure that they fully understand and explain to customers the risks of investing in the products they are offering. That includes researching the products thoroughly before they decide to offer them and ensuring advisers have the tools they need to explain the risks to customers. Chase de Vere failed to do this, leaving its customers without a full understanding of the risks they were taking by investing their money in Keydata products.'
The FCA considers that had Chase de Vere researched the Keydata products properly from the outset, it would have realised that they had distinctive features and risks requiring additional controls and restrictions on sales, particularly to customers with a cautious attitude to risk.
The firm has agreed to review its sales to any customers who have not already made a claim to Chase de Vere or the Financial Services Compensation Scheme about Keydata, and to provide redress where appropriate.
Chase de Vere agreed to settle at an early stage of the investigation and therefore qualified for a 30% Stage 1 discount. Without the discount the financial penalty would have been £800,000.
Notes to editors
- The final notice for Chase de Vere Independent Financial Advisers Limited.
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- Keydata Investment Services Limited was a product provider that designed and distributed structured investment products. These were distributed via a network of independent financial advisers.
- The Keydata life settlement products were investments in corporate bonds whereby Keydata purchased bonds which were issued by one of two Luxembourg based companies, SLS Capital SA and Lifemark SA, which used the money raised to buy portfolios of life insurance policies from predominantly elderly US citizens.
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.